Ethereum Faces Fresh Pressure as Liquidations, ETF Outflows and Foundation Cuts Shake ETH Sentiment
Ethereum (ETH) entered a critical period after a sharp market downturn triggered a wave of liquidations, renewed selling pressure and concerns about the network’s near-term outlook. The second-largest cryptocurrency dropped 5% on Tuesday, wiping out the gains accumulated over the previous two weeks and forcing roughly $170 million in leveraged bullish positions to close.
The decline came as broader crypto weakness continued, with Bitcoin’s inability to firmly reclaim the $62,000 level adding pressure across the market. Investor caution has also increased due to uncertainty surrounding global events, including US-Iran peace negotiations, while rising artificial intelligence infrastructure costs have pushed markets into a more defensive stance.
ETH’s recent weakness has been significant, with the asset losing around 20% over the past month, slightly underperforming the wider crypto market’s 17% decline. The sell-off has fueled a rise in bearish positioning, with Ethereum perpetual futures funding rates briefly turning negative as short sellers paid to maintain their positions.
Adding to the concerns, the Ethereum Foundation announced a major internal restructuring that includes a 20% workforce reduction following a 40% budget cut. The move has raised questions among some investors about Ethereum’s development direction, although upcoming network improvements continue to provide optimism for long-term supporters.
Despite short-term challenges, Ethereum’s ecosystem remains one of the strongest in the blockchain industry. The network continues to dominate decentralized finance, with around $38 billion in total value locked (TVL), representing more than half of the DeFi market. When layer-2 networks are included, Ethereum also maintains a major share of decentralized exchange activity.
However, declining activity across decentralized applications has created additional pressure. Total ecosystem TVL has fallen by about 23% over the past three months, while weaker demand for blockchain services has raised concerns about future growth and fee generation.
Investor sentiment has also been affected by continued outflows from US-listed Ethereum spot ETFs. The products have seen six consecutive weeks of withdrawals, with approximately $910 million leaving since mid-May. The decline reduced total ETF assets to about $9.4 billion and highlighted weakening institutional demand.
Meanwhile, Ethereum treasury holder BitMine has reported billions in unrealized losses on its ETH holdings, though the company continues expanding its position. While there is no immediate indication of forced selling, the situation has added uncertainty for institutional investors watching Ethereum’s market performance.
ETH’s supply dynamics remain relatively controlled, with annual inflation estimated near 0.8%, while staking rewards sit around 2.7%. Still, some investors argue those returns are less attractive compared with traditional yield opportunities such as money market products.
With liquidations accelerating, ETF demand weakening and confidence under pressure, Ethereum faces a key test. The network’s strong DeFi position and upcoming upgrades remain major strengths, but traders are now watching whether ETH can stabilize and rebuild momentum after its latest correction.